Environmental Regulation, Resource Misallocation and Industrial Total Factor Productivity: A Spatial Empirical Study Based on China’s Provincial Panel Data

Xu Dong, Yali Yang, Xiaomeng Zhao, Yingjie Feng and Chenguang Liu
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Xu Dong: School of Economics, Zhengzhou University of Aeronautics, Zhengzhou 450046, China
Yali Yang: School of Information Management, Zhengzhou University of Aeronautics, Zhengzhou 450046, China
Xiaomeng Zhao: School of Economics and Business Administration, Central China Normal University, Wuhan 430079, China
Yingjie Feng: School of Economics, Zhengzhou University of Aeronautics, Zhengzhou 450046, China
Chenguang Liu: School of Economics, Zhengzhou University of Aeronautics, Zhengzhou 450046, China

Sustainability, 2021, vol. 13, issue 4, 1-20

Abstract: A vast theoretical and empirical literature has been devoted to exploring the relationship between environmental regulation and total factor productivity (TFP), but no consensus has been reached and the reason may be attributed to the fact that the resource reallocation effect of environmental regulation is ignored. In this paper, we introduce resource misallocation in the process of discussing the impact of environmental regulation on TFP, taking China’s provincial industrial panel data from 1997 to 2017 as a sample, and the spatial econometric method is employed to investigate whether environmental regulation has a resource reallocation effect and affects TFP. The results indicate that there is a U-shaped relationship between environmental regulation and industrial TFP and a negative spatial spillover effect of environmental regulation on industrial TFP at the provincial level in China. Both capital misallocation and labor misallocation will lead to the loss of industrial TFP. Capital misallocation has a negative spatial spillover effect on industrial TFP, while labor misallocation is just the opposite. Environmental regulation can produce a positive resource reallocation effect, which in turn promotes the industrial TFP in the range of 28% to 33%, while capital misallocation and labor misallocation are only partial mediator.

Keywords: environmental regulation; industrial total factor productivity; capital misallocation; labor misallocation; spatial durbin model; resource reallocation effects (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:4:p:2390-:d:504162

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